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Why Is Pentair plc (PNR) Up 9.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Pentair plc (PNR). Shares have added about 9.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Pentair plc due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Pentair Earnings and Sales Surpass Estimates in Q3

Pentair reported third-quarter 2022 adjusted earnings per share (EPS) of 99 cents, beating the Zacks Consensus Estimate of 93 cents per share. The bottom line surpassed the company’s guidance of 93 cents to 95 cents and improved 11% from the 89 cents reported in the prior-year. Pricing actions helped offset the impact of the ongoing inflation in costs, leading to an improvement in earnings.

Including one-time items, EPS was 70 cents compared with the prior-year quarter’s 86 cents.

Net sales improved 9% year over year to $1.06 billion in the quarter under review and outpaced the Zacks Consensus Estimate of $1.05 billion. Excluding the impact of acquisitions, divestitures and currency translation, core sales grew 4% in the quarter.

The cost of sales advanced 11% year over year to $707 million. The gross profit in the reported quarter amounted to $348 million, up 4% from the prior-year quarter. The gross margin was 33.0% compared with the year-ago quarter’s 34.5%.

SG&A expenses totaled $177 million which surged 22% from the prior-year quarter’s $158 million. Research and development expenses were up 8% year over year to $23.7 million.

The operating income in the quarter was $147 million, down 12% year over year. The adjusted segmental operating income increased 15% year over year to $207 million. The segment margin came in at 19.6% in the reported quarter, a 110 basis-point expansion from the year-ago quarter.

Segmental Performance

Net sales in the Consumer Solutions segment moved up 8% year over year to $665 million. The segment’s operating earnings increased 10% year over year to $159 million.

Net sales in the Industrial and Flow Technologies segment totaled $390 million, up 10% from the prior-year quarter. Operating earnings for the segment rose 25% year over year to $65.7 million.

Financial Update

Pentair had cash and cash equivalents of around $119 million at the end of the third quarter compared with $94.5 million at 2021-end. Net cash generated from operating activities was around $271.5 million in the first nine-month period of the current year compared with $540.4 million in the prior-year period. The company had long-term debt of $2,448 million as of Sep 30, 2022, up from $894 million as of Dec 31, 2021.

PNR completed the acquisition of Manitowoc Ice, a leading provider of commercial ice makers, in July 2022. The integration is currently underway. Manitowoc Ice brings a complementary global commercial presence that will expand Pentair’s end-to-end water filtration and ice solution offerings for food service customers.

Guidance

Pentair now expects the adjusted EPS guidance for 2022 to be around $3.65. Previously, the company had provided a range for adjusted EPS guidance between $3.70 and $3.76. The sales growth projection for the year is currently at 9%, compared to the 8-10% band expected earlier.

For the fourth quarter of 2022, PNR expects adjusted EPS at around 79 cents. The company anticipates current-quarter sales to be in-line compared with the prior-year levels.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -10.06% due to these changes.

VGM Scores

Currently, Pentair plc has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pentair plc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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